Teach teens a lesson with prepaid cards
Youngsters can learn how to manage money without the risk of overspending
Sunday 20 November 2011
If our schools aren't going to teach teenagers about money, the responsibility rests firmly on the shoulders of parents.
There are financial products out there aimed at youngsters including the new MeCard prepaid card for teens from MasterCard, but are they a help or a hindrance to concerned parents?
Prepaid cards are often seen as a handy alternative to travellers' cheques for anyone wanting to spend abroad. The major benefits are that you cannot spend more money that you have preloaded on to the card. This is not only beneficial in terms of budgeting, but also in terms of card fraud. As a parent, it means that your child can access money without being able to run up a huge debt or put your bank account at risk.
"Cards aimed at children will include limitations designed to stop the child getting into any sort of debt but at the same time allowing them to experience controlling their account," says Sylvia Waycot from Moneyfacts.co.uk. "Some cards may offer limitations on the size of transactions or only allow cash withdrawals. If the primary cardholder is the parent then they could also have access to the spending information to see where the card has been used."
The MeCard for teens is the latest launch in the prepaid market allowing adults to use a "parent" MasterCard (on which they can keep up to £3,000) to set a monthly budget for their kids. They can transfer money (a maximum of £500) for emergencies by keeping a running balance on their own card so that cash can be moved instantly.
"Prepaid cards provide the perfect balance giving teenagers complete independence when making purchases on and off line, with no risk of overspending, while their parents retain the ability to monitor spending and top up remotely when required," says Warren Tayler, the chairman of MeCard.
Top-ups to the parent card can be made online at the MeCard website or at a PayPoint terminal in your local shop, taking about two hours to show up on the account. The MeCard is accepted anywhere displaying a MasterCard mark and at cash machines in the UK or abroad. Although the child is able to view balances and shop online and top up their pay-as-you-go phone with the account, the primary liability will always be with the parent.
The big problem with any prepaid card is that there are myriad charges to watch out for including card application fees, monthly service charges, top-up fees, ATM withdrawal fees, transaction charges and renewal costs to replace the card once it has expired, or if you lose it. There may even be an inactivity charge if the card is left unused, so do check and cancel the card if you don't want it any more.
"Watch out for the fees," says Andrew Hagger from Moneynet.co.uk. "It costs £9.99 to take out a MeCard and a renewal fee of £9.99 a year. Withdrawals from an ATM are charged at 75p each and an SMS balance request is 15p. To load the card is free by BACS but £1 by debit card. There is also a £10 fee to close the account."
You should also find out if there is a minimum top-up – it may be more difficult for your teenager to budget carefully if they are forced to load at least £50 each time. Another crucial issue is that prepaid cards do not benefit from protection under Section 75 of the Consumer Credit Act, unlike a credit card, which allows you to claim against your credit card company if something you buy (even in part payment) with your card is faulty.
The MeCard aside, there is only a small selection of prepaid cards aimed specifically at teenagers. Several of the best cards are no longer available, including the Extreme Cred Maestro, which had no charges for spending in the UK (2 per cent outside of the UK), and the very popular O2 Cash Manager and Load and Go cards have also been closed this month although new cards powered by NatWest are expected soon.
From what is available, the Splash Plastic Maestro card is open to teens and offers free transfers from your bank account or Post Office and top-up charges at 3 per cent. However, there is an additional £5 card issue fee, an annual fee of £4.95, a £1.50 charge for ATM withdrawals and, more importantly, a 2.5 per cent transaction fee on spending.
A better option may be the Virgin Pay As You Go Visa card with free top-ups with a debit card (instantly) and the Post Office (overnight). But the sting is in the usage charges: a card issue fee of £9.95, 2.95 per cent UK transaction fees, 2.95 per cent ATM withdrawal charge, although there is no annual fee to worry about.
The Blue Sky Pay-As-You-Go (for 13-18-year-olds) charges £9.99 initially with no monthly or annual fee but levies a 1.5 per cent ATM charge, a 66p transaction fee and charges 99p for bank transfers, or, if you think it is worthwhile, you can pay £4.45 per month to get free transactions, free bank transfers (£1.99 at Post Office) and 99p ATM withdrawals.
Beyond this, parents can take out their own prepaid card and add their child as an additional cardholder. For example, Cashplus Gold and Clearcash pay-as-you-go cards allow children over 13 to be added, but once again, charges vary widely so you must compare loading, transaction and usage fees carefully.
Caroline and George Maxwell, GP from Cirencester
When George, 13, went away to boarding school, Caroline, 45, was worried about how he would manage with money.
"Carrying cash isn't a good idea from a security point of view. It is also easily lost and a lot of the purchases his age group make are online," she says.
Caroline decided the MeCard prepaid was the ideal way to give George independence and help him to learn how to manage money without the risk of overspending. She was persuaded by the flat charge for the card and, although there is a charge for drawing out cash of 75p, purchases in shops and online are free.
"Once the account was set up I knew there wouldn't be any surprises," she says. "The ability to load money remotely and instantly is great in an emergency and saves me having to deposit cash at a bank. I can also see how much he is spending and know whether he is likely to run out."
Bargain Hunter: Nimber looks to deliver savings and profit as it turns us into a nation of couriers
10 tips for taking out a personal loan
Women born in 1950s facing severe financial hardship over pensions could have fates changed by Ros Altmann - should she choose to help
Five Questions On: GB Energy's new tariff
Simon Read: You're guilty until proven innocent when HMRC sends in the tax credit detectives
- 1 California man brutally beat 82-year-old Sikh grandfather he mistook for 'one of those people'
- 3 Charles Kennedy 'had better judgement drunk than many sober politicians' says Ian Hislop
- 5 We have six months to save the world, says leading economist
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination
Migrants in Kos: Photos show real tragedy after Brits abroad complain of 'awkward' holidays
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
Michael Gove determined to scrap the Human Rights Act – even if Scotland retains it
Threat to scrap Human Rights Act could see UK follow Nazi example, warns UN official
Church of England 'one generation away from extinction' after dramatic loss of followers
iJobs Money & Business
£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...
£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...
£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...
£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...
Day In a Page
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool